Document of The World Bank FOR OFFICIAL USE ONLY Report No: 89080 RESTRUCTURING PAPER ON A PROPOSED PROJECT RESTRUCTURING OF SUSTAINABLE MANAGEMENT OF MINERAL RESOURCES PROJECT CREDIT NO. 45840-TA JUNE 9, 2009 TO THE UNITED REPUBLIC OF TANZANIA June 25, 2014 SEGOM SDN This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization. ABBREVIATIONS AND ACRONYMS ASM Artisanal and Small Scale Mining FDI Foreign Direct Investment FY Fiscal Year GST Geological Survey of Tanzania ICT Information and Communication Technology IT Information Technology LGAs Local Government Authorities LSM Large Scale Mining MRI Mineral Resources Institute PDO Project Development Objective PMU Project Management Unit SMMRP Sustainable Management of Mineral Resources Project TGC Tanzania Gem Center Tsh Tanzanian Shilling US$ United States Dollar VAT Value Added Tax Regional Vice President: Makhtar Diop Country Director: Philippe Dongier Sector Manager: Christopher Gilbert Sheldon Task Team Leader: Mamadou Barry 2 TANZANIA SUSTAINABLE MANAGEMENT OF MINERAL RESOURCES CONTENTS Page A. SUMMARY ........................................................................................................................... 4 B. PROJECT STATUS .............................................................................................................. 4 C. PROPOSED CHANGES ...................................................................................................... 5 3 Tanzania -Sustainable Management of Mineral Resources Project RESTRUCTING PAPER A. SUMMARY 1. On January 22, 2014, The World Bank received from the Government of Tanzania, through the Ministry of Finance a letter (Reference No. CBD.353/441/01), requesting the World Bank to extend the closing date of World Bank Credit No. 45840- TA – Sustainable Management of Mineral Resources Project (“SMMRP�) from June 30, 2014 to June 30, 2015. This is a partial, no-cost extension which requires a restructuring of the project. The restructuring involves dropping some activities which do not affect the project description in the Loan Agreement, reallocating the funds to strengthen existing activities within the benefit component. These changes do not affect the project performance indicators. B. PROJECT STATUS 2. SMMRP was approved by the Board on June 9, 2009 for a total Bank financing of USD 50 million dollars and became effective on September 22, 2009. The development objective of the project was to strengthen the Government’s capacity to manage the mineral sector to improve the socioeconomic impacts of large and small-scale mining for Tanzania and Tanzanians and enhance private local and foreign investment. The project had four components: (i) improving the Benefits of the Mineral Sector for Tanzania, including artisanal and small-scale mining, local economic development and skills development; (ii) strengthening governance and transparency in mining; (iii) stimulating mineral sector investment; and (iv) project coordination and management. Overall responsibility for project implementation was vested in the Ministry of Mines and Energy through the Project Management Unit (PMU). 3. Implementation challenges and corrective actions. Following declaration of effectiveness in September 2009, project implementation was delayed by a number of related factors. These include leadership turnover, insufficient project ownership, and limited capacity for implementation. In 2012, the Government agreed to take a number of remedial actions to address the implementation problems of the project. These include making staffing changes at the PMU, improving implementation oversight, and realigning activities within project components. 4. Implementation performance to date. As a result of the remedial measures discussed above, project implementation progress accelerated significantly since December 2012. Cumulative disbursements increased from US$5.76 million during the period FY09-Q4 to FY12-Q3 to US$35.6 million during the period FY12-Q4 to FY14- Q3. Total cumulative disbursements have reached US$41.4 million or 83% of the original project funds. 4 5. The performance of the implementation agency has been satisfactory and there are no outstanding audits. There were six observations in the audit ending June 30, 2013. Of these, five have already received management response. C. PROPOSED CHANGES 6. Dropping activities which have not yet started and are no longer priority. These include civil works and other planned activities which are not likely to be completed during the extension period (see Table I below). Table 1: Activities Agreed to be dropped Display furniture and fittings for Tanzania Gemological Center – Arusha 300,000 Supply of equipment for Geo-scientific Data integration system 400,000 Procurement of Lab Equipment phase II for MRI 350,000 Consultancy services– Project Technical Officer (I) 36,000 Consultant for designing/Set-up the Laboratory layout at MRI 60,000 Total Amount USD 1,146,000 7. Reallocating the funds from dropped activities to scale up or support existing activities which have become a major policy priority: These include expanding the benefits component to empower Tanzanians to become active in mining and to address public perceptions that the socio-economic impact mining sector is not adequate (see Table 2 below). Table 2: Activities to be supported from reallocated funds BRIEF DESCRIPTION OF ACTIVITY ESTIMATES Consultancy services to strategically link LSM and LGAs plans 50,000 Additional Man Month for Consultancy Services for Preparation of Geo-scientific Data Management 200,000 System Pilot Studies - Specific Geo-scientific Investigation on Demarcated area for ASM 210,000 Capacity Building – MRI 300,000 Additional fund for Small scale Grant phase I 500,000 Training of the Zonal and Residence Mines Office 250,000 Capacity Building - TGC 250,000 Total 1,760,000 8. Extending activities which have significant effect on achieving the project’s development objectives: These include long-lead, high impact policy-related project items which are critical to achieving the project’s development objectives. Most of these activities are either in progress or in advanced stage of procurement (see table 3). Table 3: Activities in progress which require extension BRIEF DESCRIPTION OF ACTIVITY ESTIMATES Procure office equipment for accreditation of TGC and preparation of Training manuals for 480,000 Stone Carving, Jewelry and Lapidary Unit Supply of ICT Equipment for TGC 200,000 5 BRIEF DESCRIPTION OF ACTIVITY ESTIMATES Supply of Gas and Petroleum Training equipment for MRI -Dodoma 450,000 Supply of Furniture for New Established Mine Offices 380,000 Procurement of office furniture for MADINI House in Dodoma 400,000 Procure lapidary, rock carving and Jewelry training machinery and facilities 1,500,000 Renovation and installation of equipment for the Minerals Data Recovery Centre - Morogoro 650,000 Rehabilitation of existing Tanzania Gemological Centre in Arusha 950,000 Renovation of GST Laboratory Building 500,000 Rehabilitation the Minerals Resource Institute Administration Block 960,000 Rehabilitation of GST Administration building 1,800,000 Supply of assorted gemological wire for Tanzania gemological Centre(TGC) -Arusha 50,000 Consultancy services for design and supervision for rehabilitation Tanzania Gemological 86,500 Centre Consultancy services– Procurement Specialist (II) 36,000 Consultancy services for preparing implementation strategy for phase 2 of the TGC Arusha 250,260 Consultancy services for Renovation of GST laboratory building 99,800 Consultancy for design and supervision of installation of equipment for the Mineral Data 95,850 Recovery Consultancy services for Preparation of Geoscientific Data Management System 775,626 Consultancy services to conduct geological mapping, geochemical Surveys, ground 1,300,000 geophysical surveys and capacity building Consultancy services to strategically link LSM and LGAs plans 401,563 Consultancy for designing and supervision of the refurbishment of facilities for the Minerals Resources Institute (MRI) including IT Infrastructure 120,000 Small Scale Phase II 4,000,000 Total Amount USD 15,485,598 9. Extending the closing date: The closing date of the project will be extended by one year from June 30, 2014 to June 30, 2015. The justification for project extension is based on the turn-around of implementation performance over the past year as evidenced by (i) improved turn-around of procurement activities (about 80% of the project funds will be disbursed or committed by the project’s initial closing date of June 30, 2014); and (ii) Satisfactory implementation progress for key activities (all components will have achieved satisfactory rating for implementation progress by June 30, 2014). 10. Reallocation to Withdrawal Schedule: The proposed changes and reallocation of proceeds within the same components will result in a new Withdrawal Schedule, which is presented below. Category of Expenditure Allocation % of Financing Current Current Reallocation Revised of Proceeds Reallocation (1) Works, Goods, 29,000,000 1,090,000 30,090,000 100% Consultants’ services, Training and Operating Costs under Parts A.1 through A.4(a) and (b) and Parts A.5 through Part D of the Project (2) Grants for Artisanal and 2,700,000 310,000 3,010,000 100% Small scale Miners Grant 6 Category of Expenditure Allocation % of Financing Current Current Reallocation Revised of Proceeds Reallocation Program under Part A.4 (c) of the Project (3) Refund of Project 400,000 400,000 Amount payable Preparation Advance pursuant to Section 2.07 of the General Conditions (4) Unallocated 1,400,000 -1,400,000 0 TOTAL AMOUNT 33,500,000 33,500,000 7